We have been warned. Death of the post-WWII geopolitical regime

Our descendants will wonder how America fell from a pinnacle of prosperity and power such as the world has never seen. Our policies for the past thirty years have been both astonishingly foolish and broadly supported by America’s elites (Left and Right). This note focuses on the core of our irrational economic policy, the “twin deficits” — the growing liabilities of the Federal Government (actual debt is only a fraction of this), and the current account deficit (US consumption in excess of our income, financed by foreign debts). Like any drunken binge, this felt good. Now a new day dawns, and the hangover.

We have been warned. Here are a selection of warnings from 2003 and 2004, given by a wide range of experts and institutions. This list could easily be extended both backwards and forwards in time; a few such are included to illustrate this.

As noted in Chapter I, warnings given with sufficient lead time to avoid disaster — allowing battleship America to avoid the ice ahead — were derided as obviously false. Only sightings of peril directly ahead — too late for corrective action — can gain the attention of America’s elites and citizenry.

Now the time for warnings has passed, as we no longer can avoid what lies ahead. The following materials tell what we need to know: our situation, the danger, and how we got to this point. The geopolitical implications will be the subject for a later chapter.

“The time will arrive when the pile-up of {America’s} international indebtedness — in itself a consequence of faith in the dollar — will make increased reliance on the dollar as the world’s only main international currency untenable. … the boom will not go on forever and when it ends, there could be a spectacular run on the dollar. The huge stock of international reserves held in dollars makes that currency a sitting duck in a currency crisis. It was no accident that the dollar fell to 79 yen in 1995 at the peak of the fallout from the Mexican crisis, wrecking havoc with Japan’s already distressed economy. The position of the United States as a the great debtor will eventually undermine the stability of the dollar as an international reserve currency.”

“Right now the U.S. is just charging ahead. The United States has the best recovery that money can buy. It has a very high fiscal stimulus, a huge current account deficit. It’s borrowing a great deal in order to sustain this very high recovery. That really is part of the difference between the growth we see in the United States and the euro area. But this comes at a cost of mortgaging growth further down the road.”

“These considerations have led to a renewed emphasis on estimates of the fiscal gap, which take into account longer horizons and the intergenerational transfers that are involved. Section IV presents estimates of the U.S. fiscal imbalance using an intergenerational accounting framework that encompasses the entire federal fiscal system over an infinite horizon. The results suggest that the fiscal imbalance is as high as $47 trillion, nearly 500 percent of current GDP, and that closing this fiscal gap would require an immediate and permanent 60 percent hike in the federal income tax yield, or a 50 percent cut in Social Security and Medicare benefits. The analysis also illustrates that this gap is associated with a severe intergenerational imbalance, with the burden on future generations increasing further if corrective measures are delayed.”

Asset Poverty in the United States, Asena Caner and Edward N. Wolff, Levy Institute (April 2004). Roughly 40% of US households are 3 months or less from bankruptcy. That is, their high debts and low savings mean they cannot withstand even brief periods of unemployment.

Riding for a Fall, Peter G. Peterson, Foreign Affairs (September/October 2004). Peterson is Chairman of the Council on Foreign Relations, the Institute for International Economics, and The Blackstone Group. He served as Secretary of Commerce in the Nixon administration. Excerpt:

“Three long-term trends are threatening to bankrupt America: the burgeoning costs of waging the war on terrorism, the U.S. economy’s increasing reliance on foreign capital, and rapid aging throughout the developed world. Washington must understand that committing the United States to a broader global role while ignoring the financial costs of doing so is deeply irresponsible.”

“The US expansion appears on track. … Yet, under the placid surface, there are disturbing trends: huge imbalances, disequilibria, risks — call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. What really concerns me is that there seems to be so little willingness or capacity to do much about it.“

The Long-Term Budget Outlook, by the Congressional Budget Office. They publish the same warnings again and again, ignored by Americans. December 2003. December 2005. Conclusions from the Executive Summary of the December 2005 report:

Driven by rising health care costs and an aging population, federal spending for Medicare, Medicaid, and Social Security will claim a sharply increasing share of the nation’s economic output over the coming decades.

Even if taxation reached levels that were unprecedented in the United States, current spending policies could become financially unsustainable. An ever growing burden of federal debt held by the public would have a corrosive and potentially contractionary effect on the economy.

As the U.S. tax system is now configured, federal revenues will grow faster than the overall economy. Under current law, taxpayers will face higher rates, with detrimental consequences for work, saving, and economic growth.

Fiscal policy could be financially sustainable if the growth of health care costs slowed significantly from historical rates. But even in that case, tax revenues would probably need to be higher than they have been in the past, unless the growth of other spending was curbed.

If taxation is restricted to the levels that prevailed in the past, the growth of spending on programs for the elderly will have to be reduced substantially. Limiting the growth of outlays for defense, education, transportation, and other discretionary programs would not be enough to ensure fiscal sustainability.

Like this:

Post navigation

16 thoughts on “We have been warned. Death of the post-WWII geopolitical regime”

I have long been aware of and believed there are MAJOR problems with the US, and world, economy. However, I also realize that the “system” has remarkable abilities to ward off disaster, or diminish it to manageable proportions. I don’t know how “they” will do it, but I think there are enough “intelligent” and powerful forces involved that they will find ways and means to salvage the wreck of the US, and global, economy. There will be pain, but not death.

These are just warnings. Nobody knows how it will end, for the outcome depends on choices that lie ahead. Choices we do not yet understand.

You are of course right about our system’s core strength. As Adam Smith said, “There’s a lot of ruin in a nation.” But that does not mean that we’ll enjoy what lies ahead, or that we might not emergy poorer, or that this is all unnecessary if we had governed ourselves better.

Also, what does “death” mean for a people? Bankruptcy is not death. Regime change is not death. Nuclear warfare is death. Let’s not confuse these very different outcomes.

I see this well founded speculation as merely heralding the ultimate demise of US world domination, across the board, that is, Economicaly, militarily, in presitge, technologicaly scocialy, culturaly. With the collpahs of Soviet and dillution of Chinese communisim in the 90s, the US inherited world superpower/cop status by default, that status, domination and empire lasted a paltry 10 years, scarcley more than the vaulted 3rd Riech. The US having demonstrably proven itself unworthy, and quite frankly collectively too stupid, and not up for that job.

In the final analysis, US decline is actually a blessing indisguise for all mandkind, yes, even, and particuarly for the average “schmuck” from New Jersey. If I need to explain further, forget it, you just don’t get it.

Or do you ? Just Remember, walk and read more, drive, watch TV and video games, and eat, less. Maximillian

Ha, Ha, Ha, Ha….. Sorry, I always do that when I can say “I told you so”.

For those not in the loop, I have been long predicting that the whole Iraq/Afghanistan/Iran debacle means the end of western (US/EU) influence in the Middle East, and that the only winners out of this will be Iran, Russia and China in geo-strategic terms. And they will win big.

“But what happened last Sunday still came as a bolt from the blue. China Petroleum Corporation, better known as the Sinopec Group, signed a contract with the Iranian Oil Ministry for the development of the Yadavaran oil and gas fields in southwestern Iran. ”

“But what stands out is that Beijing anticipated a long time ago the inevitability of precisely such a u-turn in US policy towards Iran. More important, it began plotting how it could take optimal advantage when the Iran question inexorably moved toward its denouement. Beijing estimated that time was of the essence. Beijing could visualize a day when Tehran would have competing customers from the Western world seeking access to its oil and gas. ”

“And by the beginning of June, Chinese regional experts had already assessed, “Iran, with no geopolitical competitors, has become the ‘boss’ within the Persian Gulf region. Since the US has fallen into the Iraqi quagmire, Iran concludes that the United States dare not use force against Iran.”

“The anonymous scholar from the Institute of Asia and Africa under the Chinese Institute of Contemporary International Relations, who wrote the above commentary for the People’s Daily, went on to give his prognosis with extraordinary prescience. He wrote, “Despite many variables and the complicated situation in the Middle East, there is one thing that remains clear. The United States cannot reverse its current downhill trend in the Middle East. Iran’s rise and its challenging gestures will further accelerate the decline of the United States’ presence within the region. In the emerging ‘new Middle East’, Iran will certainly play a role that cannot be ignored.” ”

Plus add in the fact that China just got a contract from the Iraqi Govt(?) to rebuild its electricity generation and I have to start to giggle again.

And India will jump on the Iran band wagon real soon now, to wit (again):

“Delhi’s Middle East policy rested on assumptions. First, it was assumed that the Bush administration would ultimately sort out the Iran question on American terms and the international community would have to learn to live with it. Delhi believed that Iranian President Mahmud Ahmadinejad’s strategic defiance of Washington would prove to be vacuous once the formidable American juggernaut got cracking down in earnest.

The Indian security community lives in absolute thrall of Israel’s capability to stretch its long arm and squash Iran. It was only logical to wait for the morning after Ahmadinejad to do any serious business with Iran.”

“Without doubt, the imperatives of the on-going negotiations over the civil nuclear cooperation agreement with the US left Delhi with hardly any leeway to withstand the combined American and Israeli pressure to curtail India’s cooperation with Iran.

But that is only part of the story. On the broader issues of regional security in the Middle East and the Persian Gulf, Delhi also seemed to have moved with planning within the broad framework of India’s rapidly expanding strategic partnership with the US.

Actually, Delhi’s estimation wasn’t altogether as illogical as it might seem today. It was an approach that fitted with the present Indian government’s priorities of harmonizing India’s regional policies with the US’s global strategies. The thinking ran as follows: the core agenda of the Bush administration’s Middle East policy lies in ensuring Israel’s regional dominance, and the influence of the neo-conservatives on the Bush administration’s foreign policy being what it is and given the challenge Iran poses to Israel’s regional dominance, the Bush administration cannot be expected to sit back and allow Tehran to consolidate the strategic influence it gained during the period since the invasion of Iraq in 2003.”

Expect Indian businessmen in Tehran real soon now, especially after the collapse of the US/India nuclear deal. Which was just a carefully designed attempt to totally destroy the NPT (another move to a unipolar world), trouble is Australia has pulled out (thanks to its change of Government) now and Congress, quite rightly, has killed it. So India has got nothing for its recent US/Israel cooperation.

Now we just have to finally officially lose Turkey (we’ve lost it de-facto) and it will be a clean sweep in the end of Western influence in the Middle East (though the EU has a chance to pull something out of the fire if it fast tracks them into EU membership).

Oh sure we will still have a lot of our troops dying for a few more years, and Israel will huff and puff a lot as always.

I should add, this is real, real bad for US/Israel, very bad for the EU, but from an Australian point of view, well we will just jump ship to the winners.

We did it in WW2, we will do it again. Expect a lot of others to join in as well.

From a technical (OODA) point of view the Russia/China 2 step is a joy to behold. Russia doing the diplomatic and military heavy lifting, China the ‘soft touch’ and economic. Africa, South America, Middle East, et al, brilliant.

From a ‘leading indicator’ point of view: catching the news that the recent grounding of the F-15 fleet (because they, like all the US planes, are are old and worn out) and that the US had to call on Canadian fighters to track Russian bombers was a joy (from the “I told you” point of view) to behold. Yep, there can be no doubt now (except in the Congress, White House and the Pentagon of course) that the Straus Military Reform crowd ARE right. Yep, spend squillions on F-22, F-35, FCS, missile defense (sorry giggled again), space militarisation, “Full Spectrum Dominance” (long pause for racking belly laughs), et al, but can’t even defend US airspace from a few old Russian bombers.

Quick prediction: just wait for a big announcement in the next year or so of a huge Russia/Turkey oil and gas deal and Turkey gaining ‘observer’ status in the SCO.

We are not even in the same OODA class as these boys. It’s like watching a drunken country hick with a wad of (someone else’s) cash being taken to the cleaners by a couple of city card sharps.

The thing with peer review is that it is done between peers. I mean the culture that has come out of Austrialia consists mainly of the Austrialian wave. Although the English were correct that even a bunch of convicts could eventually handle spear wieding tribesman, given enough time, flys are another matter.

Of course the Austrialians, as they call themselves now, probably had to come to America to learn 4GW anyway.

So you might say that Killculen is probably re-introducing 4GW into the US military. While this effort, by the Austrialians, seems to come a dollar short and a day late, it should not be unexpected coming from a non-peer group.

Oh, I forgot about Olivia Newton-John, never mind, you guys are peers.

“catching the news that the recent grounding of the F-15 fleet”
__________________
I have no sympathy what-so-ever for the USAF, USN, or the military congressional industrial complex they are in bed with. In programs like the V-22, F-22 and JSF, America is getting exactly
what’s deserved and hard earned. They treated those who tried to warn them so appaulingly over the years. I could go on at some considerable depth, and length, but I think you guys get it.

I’m starting to feel at home here, I didn’t at all at first, Here’s a present for you guys, call it a friendly house warming gift.

“just wait for a big announcement in the next year or so of a huge Russia/Turkey oil and gas deal and Turkey gaining ‘observer’ status in the SCO.”

I agree OS, but it may be a lot worse in terms of the USAs current aspirations and direction. I’m party to in a small way to the TV broadcasting interests for the Upcoming summer Olympics. The consensus is this will be China’s debutante or coming out party, and if it goes smoothly, this will in essience herald the reality that “they” no longer the USA are leaders.

Of course you won’t hear anything like that on your local media, for about 20 years, or after the collaphs, which ever comes first. Apart from that though, and all that you said, the USA is doing just great. MaX

“So you might say that Killculen is probably re-introducing 4GW into the US military. While this effort, by the Austrialians, seems to come a dollar short and a day late, it should not be unexpected coming from a non-peer group.”
______________
Having said that, the Aussies do still love their F-111s, that we gave them to play with, with concerns amoung the very few with a concience, that they might hurt themselves.
It’s to their credit that they’ve kept them flying, when we’ve even given up the the Turkey F-14.

Go figure.

And so, I won’t say, other than they are a marvelous fun loving, kind hearted pepole, with whom we share practically everything entirely in common, to whom by in large if it came to it, I’d trust my life to, and feel more comfortable, not to mention a lot safer amoung, than in many places in the US of A.

Yeh, well you have to remember we Aussies have a lot of experience at this and should be listened to, because we actually have a few wins at this stuff.

Starting from the hands on experience in Malaya (after our experience working with locals against the Japanese in WW2) we have long been aware of the problem with countries becoming dysfunctional in our region.

In Vietnam we worked far more effectively than the US troops there, being able to switch more easily from a ‘hard’ to ‘soft’ mode more quickly. There are many cultural (both military and social) reasons for this of course, but we have excellent training at all levels plus good doctrine. The Kiwi’s (NZ) are also excellent. The basis of the ADF is troops on the ground, with extensive patrolling, excellent local knowledge, good local relations, et al.

This has been well proven in rcent times in the Solomons and critically East Timor.

East Timor could have turned into a disaster area, worst case war with Indonesia (it actually came far too close for comfort at one point). If we had put a step wrong there…. So good diplomacy, plus a reputation for being awfully tough helped in making Indonesia blink. The Indonesian militias backed off from us (after a few nasty and, from their point of view, very one sided actions).

The Govt there called us back (a few years after the UN finished up on the initial nation building) when they were at the point of a possible nasty insurrection. The interesting thing is that ‘the other side’ also respect the Aussies and it looks that a combination of being tough a (very, very) few times plus excellent local support work and backed up by contingents of Australian Federal Police and other experts has turned the corner.

So, a study of East Timor might be a good starting point for any 4GW student. Maybe even go there.

He went there in October and gained first hand data from all walks of life, from the Govt, people, opposition, ‘the other side’, Australian military, et al. Worth studying, because this is real life, on the ground data of what it is to be like in a real life 4GW situation and how it is being changed.

Timor is a very vulnerable place, it is a very new State, with a very violent history, with enemies waiting to pounce (stir up trouble, etc). It is a perfect case study in many ways.

I also hate the word ‘won’, you don’t win these things. When things have ‘changed’ so that people feel safe, make a bit of money, kids go to school, the Govt is (reasonably) trusted, there is reasonable justice, little armed opposition (except for the usual criminals) then the job is done(ish).

Aussies (and Kiwis) get very involved in the local cultures, language skills are encouraged, reconstruction work undertaken. We use a simple method, we don’t promise the earth, we simply do. We don’t promise a new school, we build them. We’re doing similar things in Afghanistan (along with the Dutch), but we are too small there to make a difference and counter balance the stuff ups. Timor is small enough that we can operate and make a major difference.

A whole system approach is used, troops go in, but so do police, technical assistance, etc. This includes legal experts (to help set up or restore judicial systems or dispense impartial justice, an essential component), medical, et al.

The Australian community helps as well (where they support the action, which they don’t in Iraq, but do overwhelmingly for Timor – it’s a debt of honour for us), groups all over the country spring up to send money, helpers, advisors, teachers, etc, (I’m involved with one). Returning soldiers are some of the best, many are now setting up or are involved in community organisations to help East Timor. The Kiwi’s are similar with the Solomons.

An example is retired judges voluntarily going there (and the Solomons), to help set up court systems, adjudicate, teach, train, etc. Because they are outsiders they are often perceived to be more unbiased.

Part of this is the military culture as well. The ADF shows the stamp of Monash (the finest General of WW1 and that includes all the Germans, sorry Bill). A part timer (an engineer) who was the first to understand and master combined operations of all forces. Monty famously stated that if Kitchener had been replaced by Monash, WW1 would have been won by 1917.

This meant an organisation not crushed by an accumulated culture of centuries. With an attitude to invent our own, not slavishly copy others. Being far away helped as well, with limited resources we had to make do.

WW2 was an example of this culture in many ways. We were the first to beat the invincible (to that time) Germans and Japanese on their own terms in hand to hand fighting in similar numbers. Monty, famously again, after Alamein went and congratulated the Aussie 7th division first before anyone else, as they carried the battle after the tanks refused to go out and fight (so much for his tank superiority that everyone now talks about, they wouldn’t fight). The Aussies fought and beat the Japanese, in the jungle, without overwhelming superiority, and mostly with part time soldiers that had been rejected for the Reserves (all we had left at the time).

A slightly lighter ending to this:

Our only weakness is that we tend to buy rubbish equipment for ridiculous $, mostly from the US these days, oh well no one is perfect ;). Note that includes the F-111, but we can add Abrahms, Sea Sprites, F-18’s, et al. The arms dealers love it when the Aussies come round, “quick get that rubbish that no one wants out of the back, the Aussies are coming. Yes that will be 1 billion $ sir, no there is no guarantee that it works, just trust me”. But that is also a cultural thing, we bought total rubbish from the UK as well before we jumped into the US camp. Somehow we managed to make it work.

Now if the new Govt here just cancels the ‘Super’ Hornet contract, the F-35 (never to be seen) contract. We will save enough money to buy some really useful kit.

Now there is some really nice EU, Russian and Chinese stuff …. What does it take to become a member of the SCO, or can we join the EU?

I should add Max (about one of your earlier points), that yep a lot of people in the US have been treated badly over the years, who are now increasingly being proven right about the economy, equipment, strategy, et al.

But you’ve got to keep fighting in there. The world needs the US. Not what some US (and some Israeli) nutjobs want it to turn into of course. But what it has to contribute.

The world still rings with Martin Kuther King’s words. It still resonates with the Gettysburg address. It still follows the example of the black rights movement (which gave a model of how to change a society without destruction). It still marvels at the Moon landings. It cried at 9/11 (including Iran, those candlelight vigils), I lit a few myself.

US people never seem to understand that (this includes you Fabius) that the US’s real strength was never military (the US has always been crap at that), not even economic (though that has been very important), it has been cultural. An unique culture, with the best and the worst mixed, but still somehow showing a way for others to follow. It showed hope. That you can change without everything blowing up.

I still remember the Watergate hearings. The BBC played them live throughout the night. I watched them, the old Southern Senator et al. The democracy shown live on TV. No one was above the law.

The wave throughout the world was “we hold out leaders accountable to the law”. This was really leading by example.

Now, well you are just another country like the rest in the opinion of the world.

Pessimism is easy. It usually sounds wise. It just looks at one side of the equation, and hence is usally (imho) wrong.

As for the stuff above about the US not using its power wisely, we have been a beneign hegemon by historical standards.

As for my view of America’s strength (a quote from my “Death of the American Constitution“):
Our wealth is just things (“hardware”), an inheritance from past generations. What we lose we can work to replace. Our aspirations to global hegemony were revealed as a mirage in Vietnam and Iraqi, lasting less than two generations after WWII.

Our Constitution is just an idea, inherited from the founders. We created it, and its death will give us the experience to do better with the next version.

Our culture is a collection of discordant ideas, mixing lofty and base elements in a manner despised by much of the world – an easily understood disgust to anyone watching many of our TV shows and movies, or listening to some of our popular music.

The Constitution is not America. We are America. We are strong because of our ability to act together, to produce and follow leaders. We are strong due to our openness to other cultures and ability to assimilate their best aspects. We are strong due to our ability to adapt to new circumstances, to roll with defeat and carry on.

We will be what we want to be. The coming years will reveal what that is.

“The arms dealers love it when the Aussies come round, “quick get that rubbish that no one wants out of the back, the Aussies are coming.

And despite the F-111, they are STILL our friends, what does that tell us ? ;0)

“US people never seem to understand that (this includes you Fabius) that the US’s real strength was never military (the US has always been crap at that), not even economic (though that has been very important), it has been cultural.”

Well said.

After 9-11 I made the point to some Canadian colligues, that Palistinians, as one example, covered on our TV News, shaking thier fists and chanting “death to America” that if you could be there, and setup a kiosk giving away free American Green cards, most of the same would be on the next flight to NY, driving cab within a week, and probably owning it with the licience within a year.

“Our culture is a collection of discordant ideas, mixing lofty and base elements in a manner despised by much of the world”

To those who don’t know you FM, this comes perilously close to “they hate us for our Freedumb.”

The world is not lieing awake at night plotting the demise of the USA, not just yet at least. What, and WHO your talking includes those who are offended over women in short skirts, tight blouses, and with big hair. It includes TV sitcoms, with Self effacing humour about Americans being lazy, overweight, clumsy, inept, mentaly perturbed, decedant, entirely self absorbed etc, etc.

Closer to home, Canadians, Brits, most English speaking western hemesphere types, and most western Europeans, understand, and appreciate that to various degrees, and even the worst of snobs, can be caught having a good laugh at Seinfeld re-runs.

To know Americans, individually is generally to like them.

The mistake occours in trusting a flawed and decayed system that alows the wrong pepole to be in charge, and whom by nature proceed to surround themselves with similar incompetents.

This occours elsewhere to be sure, and if we had a week to spend face to face I could tell you about Canada. But other countries are not self proclaimed world leaders, and do not throw thier weight around like the USA, and that raises the sakes, immeasurably in the USAs case. Although the internal economics, and social fabric can absorb such abuse, the forgien policy and relations portion simply can’t.

So you either cleanup your act, and take responsibility, or you leave being “world cop,” to someone else, or noone.

I don’t see the former ever happening, and believe that America has had it’s shot, and emphericaly deominstrated to themselves (those who are honest) and the world that they are simply not up to the job. M

The checks and balances in the eyes of many outsiders who benefit from objectivity, have failed you, dramaticaly.